McGuire v. Lord Corp.

2020 NCBC 11

ROBERT MCGUIRE, Plaintiff, v. LORD CORPORATION, Defendant.

No. 19 CVS 11634

Superior Court of North Carolina, Wake

February 11, 2020

Vennum PLLC, by Elizabeth Vennum and Jordan Burke, for Plaintiff Robert McGuire.

Parker, Poe, Adams & Bernstein LLP, by Scott E. Bayzle and Charles E. Raynal, IV, for Defendant LORD Corporation.

ORDER AND OPINION ON DEFENDANT'S MOTION TO DISMISS

Louis A. Bledsoe, III Chief Business Court Judge

1. This action arises from Plaintiff Robert McGuire's ("McGuire") contention that Defendant LORD Corporation ("LORD" or the "Company") breached its representative's promise that he would have an opportunity to repurchase certain shares from LORD if he first elected to sell those shares to LORD under existing agreements between LORD and McGuire. McGuire alleges that he relied upon LORD's promise in selling his shares but was not permitted to repurchase his shares thereafter. McGuire alleges various claims based on these alleged facts, and LORD now moves to dismiss each of these claims under Rule 12(b)(6) of the North Carolina Rules of Civil Procedure ("Rule(s)") (the "Motion"). (Def.'s Mot. Dismiss, ECF No. 9.)

2. After considering the Motion, the related briefs, the Complaint, the documents identified and relied upon in the Complaint and submitted by LORD in support of the Motion, and the arguments of counsel at the hearing on the Motion on January 16, 2020 (the "Hearing"), the Court hereby GRANTS the Motion and dismisses McGuire's Complaint with prejudice.

I. FACTUAL AND PROCEDURAL BACKGROUND

3. The Court does not make findings of fact on motions to dismiss under Rule 12(b)(6). Rather, the Court recites only those facts alleged in the Complaint that are relevant to the Court's determination of the Motion. The Court may consider documents to which the Complaint specifically refers, even when such documents are submitted by the defendant.^[1] Oberlin Capital, L.P. v. Slavin 147 N.C.App. 52, 60, 554 S.E.2d 840, 847 (2001). Additionally, the Court may "reject allegations [in the complaint] that are contradicted by the documents attached, specifically referred to, or incorporated by reference in the complaint." Laster v. Francis, 199 N.C.App. 572, 577, 681 S.E.2d 858, 862 (2009).

4. McGuire served as LORD's Regional Director in Japan from 2013 to 2018. (Compl. ¶ 7, ECF No. 3.) In that role, LORD offered McGuire the opportunity to purchase from LORD shares of LORD's Class B Common Stock (the "Class B Shares" or "Shares") under LORD's Management Incentive Plan's Restricted Stock Program (the "Plan"). (Compl. ¶ 8.) Under the Plan, participants, including McGuire, had the opportunity to purchase Shares during a period established by LORD each year, typically in the Spring (the "Annual Purchase Period"). (See Def.'s Mem. Law Supp. Def.'s Mot. Dismiss Ex. A, at ¶ 4 [hereinafter the "Plan"], ECF No. 10.2.) To effect the purchase of Shares under the Plan, a participant was first required to sign a stock purchase agreement with the Company. (Plan ¶ 4.) McGuire signed his stock purchase agreement, specifically titled "Third Restated Stock Purchase Agreement" (the "Stock Purchase Agreement" or the "Agreement"), on May 20, 2014.^[2] (Def.'s Mem. Law Supp. Def.'s Mot. Dismiss Ex. B [hereinafter the "Stock Purchase Agreement"], ECF No. 10.3.) Consistent with the Plan and the Agreement, McGuire thereafter purchased 675 Class B Shares from LORD. (Compl. ¶ 11.)

5. The Plan and the Agreement governed McGuire's rights with respect to these Shares. Under the Agreement, McGuire was permitted to redeem Shares during a specially identified period each year (the "Annual Redemption Period"), (Stock Purchase Agreement ¶ 2(c)), and the Plan and the Agreement governed McGuire's right to repurchase any Shares after redemption, (Plan ¶ 10). LORD's Stock Redemption Policy, which is part of the Plan, (Compl. ¶ 8), specified the "procedures to be applied by [LORD] in determining the manner in which redemption requests will be received and administered in the event shareholders request redemption of shares in excess of resources made available by [LORD]." (Def.'s Mem. Law Supp. Def.'s Mot. Dismiss Ex. D, at 1 [hereinafter the "Stock Redemption Policy"], ECF No. 10.5.)

6. The Plan made clear that at all times the Compensation Committee of LORD's Board of Directors had the right, "in its sole discretion," to amend, modify, suspend, or terminate the Plan and the Stock Purchase Agreement (together, the "Program"). (See Plan ¶ 2 ("The Committee shall have the full and complete discretionary authority to . . . change the terms of the Program, including but not limited to terminating the Program."); Plan ¶ 16 ("The Committee shall have the right in its sole discretion to amend or modify the Program in any manner at any time, including the right in its sole discretion to suspend or terminate the Program in whole or in part.").) Similarly, the Stock Redemption Policy provided that it could be "modified or terminated at anytime by the Board." (Stock Redemption Policy 1.)

7. In 2017, McGuire decided to explore the potential sale of some of his Class B Shares. He e-mailed LORD's Shareholder Relations Specialist, Denise Austin ("Austin"), on March 2, 2017, stating that he understood he could sell stock once a year and was "contemplating selling some stock in March or April to cover some expenses." (Def.'s Mem. Law Supp. Def.'s Mot. Dismiss Ex. C [hereinafter the "E-mail Exchange"], ECF No. 10.4.) He asked Austin, "Is this possible?" and, "Can I then turnaround and buy back again in June?" (E-mail Exchange 1.) Austin responded the same day, "yes, you can sell up to 100K net proceeds once per year. [A]nd you can turn around and purchase in June." (E-mail Exchange 1.) McGuire then asked, "What if I want to sell more?" (E-mail Exchange 1.) Austin replied, "you can request to redeem additional shares and then the request has to be approved. I am not in the office this week and have limited access to my files. I can send you all of the request docs on Monday." (E-mail Exchange 1.)

8. According to McGuire, he relied on Austin's representation-which McGuire characterizes as a "guarantee"-concerning his right to repurchase sold Shares in June 2017 in selling 329 of his Shares for net proceeds of $449, 398.41 on April 18, 2017. (Compl. ¶ 24.) Ten days later, on April 28, 2017, LORD suspended the Plan, which prevented McGuire from repurchasing his sold Shares. LORD subsequently terminated the Plan in December 2017. (Compl. ¶¶ 26-27.) McGuire alleges that the value of each sold Share he was denied the right to repurchase has increased from $3, 230 in 2017 to $11, 000 as of the filing of the Complaint. (Compl. ¶ 35.)

9. McGuire filed this action on August 23, 2019, alleging claims against LORD for: (i) breach of contract, (ii) negligence, (iii) negligent misrepresentation, (iv) breach of implied duty of good faith and fair dealing, and (v) violation of sections 78A-8(2) and 78A-56(b)(2)^[3] of the North Carolina Securities Act ("NCSA"), N.C. G.S. § 78A-1 et seq., for which he seeks monetary relief. (Compl. 7-12.)

10. LORD filed the current Motion in lieu of an answer on November 5, 2019. The Motion has been fully briefed, and all parties were represented by counsel at the Hearing. The Motion is now ripe for resolution.

II. LEGAL STANDARD

11. When considering a motion to dismiss under Rule 12(b)(6), the Court determines "whether the allegations of the complaint, if treated as true, are sufficient to state a claim upon which relief may be granted under some legal theory." Corwin v. British Am. Tobacco PLC, 371 N.C. 605, 615, 821 S.E.2d 729, 736 (2018) (citation omitted).

12. The Court views the allegations in the complaint "in the light most favorable to the non-moving party[, ]" Christenbury Eye Ctr., P.A. v. Medflow, Inc., 370 N.C. 1, 5, 802 S.E.2d 888, 891 (2017) (citation omitted), and will not dismiss the complaint "unless it appears to a certainty that plaintiff is entitled to no relief under any state of facts which could be proved in support of the claim[, ]" Sutton v. Duke, 277 N.C. 94, 103, 176 S.E.2d 161, 166 (1970) (emphasis omitted). However, the Court is "not required . . . to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Good Hope Hosp., Inc. v. N.C. Dep't of Health & Human Servs., 174 N.C.App. 266, 274, 620 S.E.2d 873, 880 (2005) (internal quotation marks and citation omitted). Under Rule 12(b)(6), dismissal of a complaint is proper: "(1) when the complaint on its face reveals that no law supports [the] claim; (2) when the complaint reveals on its face the absence of fact sufficient to make a good claim; [or] (3) when some fact disclosed in the complaint necessarily defeats the . . . claim." Oates v. JAG, Inc., 314 N.C. 276, 278, 333 S.E.2d 222, 224 (1985).

III. ANALYSIS

A. Breach of Contract

13. McGuire does not allege that LORD has breached the Agreement or the Plan. Rather, McGuire's breach of contract claim is based on his allegation that he entered into a new contract with LORD based on his e-mail exchange with Austin "together with the Stock Purchase Agreement and the Plan" (the "New Contract"). (Compl. ¶ 38.) McGuire contends that under the New Contract, he would be permitted to repurchase during the Annual Purchase Period any Class B Shares he elected to sell during the Annual Redemption Period. (Compl. ¶ 39.) McGuire asserts that LORD breached the New Contract by preventing McGuire from repurchasing in June 2017 the Class B Shares he sold in April 2017.^[4] (Compl. ¶ 40.)

14. To maintain a claim for breach of contract, a plaintiff must plead "(1) existence of a valid contract and (2) breach of the terms of that contract." Poor v....